French leaseback schemes for providing rental income

If you are looking for a property with high rental income, then it is sensible to consider new build apartments and houses, as well as traditional resale properties. The range of new build homes covers many more types of property than May first come to mind. From a chalet in the Alps, or villa on a golf course to an apartment in Paris or an apartment by the coast in a secure residence with swimming pool; whatever your choice, new build homes always offer good value for money.

Many new build homes are available to purchase on the leaseback scheme, which means that they come with guaranteed rental income. This rental income is usually between 4–5% p.a. and is guaranteed to arrive in your bank account with no work on your part at all.

You can also consider buying a resale property to produce rental income, but it is likely that you will need to employ a management company to organize the property and its letting, unless you are based in the area and have a lot of time. Most management companies in France take around 30% of the property rental.

An example of a new build purchase

You can buy a superb 1 bedroom fully furnished holiday cottage in charming Languid. Perfect if you are looking for your Mediterranean retreat in a beautiful location near the coast. Your cottage is located in a holiday village in the picturesque hills between Names and Montpellier. There are communal facilities such as swimming pools, peanut lawns and landscaped gardens. The development is called Mass des Vines and is your ideal ‘hassle-free’ French home since it also benefits from the leaseback scheme. This is where you agree to let your property to an on-site rental management company and receive a guaranteed rental income for a period of at least nine years. You also receive a French VAT rebate, worth 19.6%!

The price with VAT and furniture package is 83,600 €. The guaranteed rental income you will receive under this leaseback scheme will vary according to which option you choose. The highest income would be where you agree to let your property for the summer, from the end of June to the beginning of September. The income is 2,100 €. You can also use your property for up to six months throughout the rest of the year. For additional income, if you let your property during the rest of the year, you receive approximately 60% of whatever your cottage generates. This could be especially fruitful during holiday periods such as Easter and half-term breaks.

An example of financing a new build purchase

You opt for a French mortgage for 80% of the price of the property with VAT and furniture (worth 66,860 €). Initially, you will have to fund the 20% deposit (16,720 €) and the notary fees (estimated at 3,300 €) yourself. However, the interesting part is that when the French VAT (worth 13,700 €) is refunded post completion, you get to keep it and spend it how you wish (and perhaps reinvest it in another French leaseback property!).

Take the VAT rebate away from your purchase costs of 20,020 €, this means that you will have only invested 6,320 € or £4,400. Monthly repayments would be 345 € and life assurance 13 € per month. Your annual outgoings would be 4,296 €. Once you take into account the 2,100 € guaranteed rental income for the summer months, your holiday home will only be costing you 183 € per month: just £126 per month!

If you have a lower cash contribution initially available, the second option allows you to buy with a 100% mortgage. Repayable over 25 years, the loan covers the property, VAT and furniture. Your only contribution would be towards the life assurance, which is paid in one lump sum worth 4,100 €. You pay this on the acceptance of your mortgage. You also pay for the notary fees at 3,300 €. In total your cash investment and costs amount to 7,100 € or £5,103. The VAT rebate, once received would be transferred straight to the mortgage. Monthly repayments would be 432 € or £298 per month. Factor in the guaranteed rental income and this takes the monthly cost down to 257 €, or £177 per month.

Back to top | sitemap | privacy policy | resources